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Peak Oil Demand Threatens to Destroy Entire Oil Industry

From Nick Cunningham: For more than two years the oil industry has suffered through its worst down cycle since the 1980s, and relief may not come until the middle of 2017 at the earliest.Some argue that oil prices may take even longer before they rebound. But while oil executives are focusing on the next few years, a much bigger threat looms over the long-term: Peak oil demand.A new report from the World Energy Council predicts that global demand for crude oil could hit a peak in 2030 at 103 million barrels per day. The scenario would require rapid and substantial advancements in electric vehicles, efficiency, renewable energy, and digital technologies – developments that are no longer difficult to imagine. Additionally, the report envisions a scenario in which global primary energy demand – which includes energy demand for everything including transportation and electricity – could also peak before 2030.These conclusions fly in the face of the prevailing assumptions within the oil and gas industry, which assumes consistent and stable growth in demand for decades to come. The oil market has always gone through cycles, in which demand spikes or flattens out. The cyclical nature has overwhelmingly been due to the changing nature of global or regional economic growth. But while demand has always been a bit volatile in the short-term, oil demand has grown inexorably for more than a century as population and GDP expand. Recessions hit demand, but once economies recover, demand resumes its upward trajectory. This constant, almost a law of nature, makes it difficult for many to picture a structural, rather than just a cyclical, decline in oil demand. But many analysts, including the WEC, say that such a development is underway.“Historically people have talked about peak oil but now disruptive trends are leading energy experts to consider the implications of peak demand,” Ged Davis, executive chair of scenarios at the World Energy Council, said in a statement.The findings from the World Energy Council echo those of other oil market and clean energy analysts. Bloomberg New Energy Finance, for example, published a scenario earlier this year that detailed a decline of more than 13 million barrels of oil demand by 2040 due to the advancements of electric vehicles. That would erase roughly 13 percent of oil demand from today’s levels – which would still leave the world consuming a lot of oil 25 years from now, but the demand destruction would be enough to keep oil prices permanently low. BNEF expects the world to hit a peak in oil demand in the mid-2020s, a bit sooner than the World Energy Council report.“The longer-term outlook, beyond 10 years, is certainly less rosy,” Alex Blein, energy portfolio manager at Amundi, told Bloomberg an interview. “Given the advances in battery technology, by 2030 carbon-powered vehicles will be the exception rather than the norm. This will inevitably impact on oil demand.”A lot will depend on government policy, of course. The WEC report says that in its low carbon scenario, in which governments impose costs on fossil fuels and incentivize EVs and renewable energy, global oil demand will still hit a peak around 2030, but at a much lower level of about 94 mb/d. Alternatively, the business-as-usual trajectory has the world heading for a peak of about 104 mb/d between 2040 and 2050. Obviously, the market dynamics are fluid, and great unce…